Generative AI is advancing rapidly, with pioneering models demonstrating vast potential to automate content creation. Companies like OpenAI, Anthropic and others have taken early leadership with groundbreaking research. Meanwhile, firms like Google, Microsoft and Amazon collectively pour billions into AI yearly and show no signs of slowing investment. These companies have already debuted powerful generative products, putting pressure on Apple.
Based on our analysis of the generative AI field and conversations with leading researchers, we estimate Apple will need to invest around $1-2 billion annually to effectively compete in this critical area over the next 5 years. While this represents a sizeable commitment, it is necessary to avoid losing ground to competitors aggressively funding generative AI development like Google, Microsoft and Amazon. These firms already collectively pour billions into AI each year and show no signs of slowing investment.
Our data suggests that in 2023 and 2024, Apple will buy between 2,000 and 3,000 and 18,000 to 20,000 AI servers. In 2023 and 2024, it will account for around 1.3% and 5% of global AI server shipments, respectively.
Apple’s Position
While Apple uses AI across its products, it has yet to launch a generative AI system or application. Internally developed models like Apple GPT and Ajax have not been integrated into products. Apple lags behind competitors in generative AI research and commercialization. Without dedicating proper resources, Apple risks losing the ability to drive innovation and capitalize on emerging opportunities in this critical field.
Nvidia’s HGX H100 8-GPU, built for generative AI training and inference, seems to be the most popular specification this year, so it’s likely that’s what Apple is buying for its AI servers. Some 4Q24 shipments may additionally include an upgrade to the B100 solution.
The average cost of an HGX H100 8-GPU server is $250,000. That’s why experts predict Apple will shell out at least $620 million on artificial intelligence (AI) servers in 2023, and another $4.75 billion the following year.
Generative models are rapidly growing in scale and capabilities. Training increasingly powerful models requires vast computing resources that come at a high cost. To develop world-class generative research and integrate related technologies into its products on a timeline similar to peers, Apple will need dedicated funding on the scale mentioned above. Anything less risks ceding leadership in a domain that may define the technology industry’s future.
Funding Needs
Our study into the topic of generative AI and our conversations with experts have led us to conclude that Apple will need to invest between $1 to $2 billion each year over the next five years. This scale of funding is necessary to develop world-class generative research, hire top talent, acquire capabilities, and integrate related technologies on par with industry leaders. Sustained investment below this level could severely limit Apple’s competitiveness in generative AI going forward.
Of course, the precise figure could vary based on strategic priorities and technological breakthroughs. But make no mistake – without serious commitment to generative AI in the billions, Apple’s ability to drive innovation in this sphere and capitalize on emerging opportunities will be limited. As with other transformative technologies, sustained investment is key to gaining a long-term competitive edge.
Recommendation
Our advice would be that Apple and other firms to carefully assess generative AI’s potential impacts and allocate commensurate resources to ensure they can actively shape, rather than merely react to, the changes to come. The winners of tomorrow will be those investing boldly in advanced AI today.
As a leading technology company, Apple recognizes the importance of artificial intelligence, particularly generative AI, in driving future innovation. However, substantial investment will be required for Apple to effectively compete in this critical area against peers aggressively funding AI development. In this report, we analyze Apple’s position in generative AI and estimate the level of funding needed over the next 5 years to close the gap with competitors.
We advise Apple to carefully assess generative AI’s impacts and allocate commensurate resources to shape emerging changes. The winners in technology industries are those investing boldly in advanced AI. Apple must commit serious funding in the billions for generative AI to remain competitive and a leader in driving innovation. Without such commitment, ceding ground to better-funded peers in this pivotal domain will be difficult to avoid.
